Still, China Mobile managed to add about 10 million iPhone users (as of October 2011), who paid for an unsubsidized phone just to be with China Mobile's stronger 2G network. We believe that Qualcomm's recent announcement of a baseband chip that supports China Mobile's networks will finally make it possible for Apple to release an iPhone on the world's largest carrier. When that happens, it will help China Mobile add even more iPhone customers and increase its 3G footprint.

Only about 8% of China Mobile's total subscriber base is 3G customers. This gives China Mobile over 600 million 2G customers who may one day transition to 3G. Wider availability of smartphones that support its 3G network will help it promote 3G better and gradually transition its huge 2G base to 3G.

Adding 3G subscribers will help China Mobile increase its ARPU levels as 3G smartphone users are huge data users as well. But the subsidies associated with smartphones such as the iPhone may cause its margins to fall. We have seen China Unicom's EBITDA margin for its mobile division decline sharply since the end of 2009, when it first started selling the iPhone. But its ARPU levels have also increased sharply since then.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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